ANNUAL REPORTOF THEFEDERALTRADE COMMISSIONFOR THEFISCAL YEAR ENDED JUNE 301936UNITED STATESGOVERNMENT PRINTING OFFICEWASHINGTON: 1936For Sale by the Superintendent of Documents, Washington, D. C - - - Price 20 cents (Paper cover)FEDERAL TRADE COMMISSIONCharles H. March, Chairman 1William A. Ayres, Vice ChairmanGarland S. Ferguson, Jr.Ewin L. DavisRobert E FreerOtis B. Johnson, SecretaryFEDERAL TRADE COMMISSIONERS--1915-36Name State from which appointed Period of serviceJoseph E. Davies Wisconsin Mar.16, 1915-Mar. 18, 1918.Edward N. Hurley Illinois Mar.16, 1915-Jan. 31, 1917.William J. Harris Georgia Mar.16, 1915-May 31, 1918.Will H. Parry Washington Mar.16, 1915-A p r. 21, 1917.George Rublee New Hampshire Mar.16, 1915-May 14, 1916.William B. Colver Minnesota Mar.16, 1917-Sept. 25, 1920.John Franklin Fort New Jersey Mar. 16, 1917-Nov. 30,1919.Victor Murdock Kansas Sept. 4, 1917-Jan. 31, 1924.Huston Thompson Colorado Jan. 17, 1919-Sept. 25, 1926.Nelson B. Gaskill New Jersey Feb. l. 1921-Feb. 24, 1925.John Garland Pollard Virginia Mar. 6, 1920-Sept. 25, 1921.John F. NugentIdaho Jan.15, 1921-Sept. 25, 1927.Vernon W. Van Fleet Indiana June 26, 1922-July 31, 1926.Charles W. Hunt Iowa June 16, 1924-Sept. 25,1932.William E. Humphrey Washington Feb.25, 1925-Oct. 7, 1933.Abram F. Myers Iowa Aug. 2, 1925-Jan. 15, 1929.Edgar A. McCulloch Arkansas Feb.11, 1927-Jan. 23, 1933.Garland S. Ferguson North Carolina Nov.14, 1927,Charles H. March Minnesota Feb. 1, 1929.Ewin L. Davis Tennessee May 26,1933.Raymond B. Stevens New Hampshire June 26, 1933-Sept. 25, 1933.James M. Landis Massachusetts Oct.10, 1933-June 30, 1934.George C. Mathews Wisconsin Oct.27, 1933-June 30,1934.William A. Ayres Kansas Aug. 23,1934.Robert E. Freer Ohio Aug.27, 1935.EXECUTIVE OFFICES OF THE COMMISSION815 Connecticut Avenue NW., Washington, D. C.BRANCH OFFICES45 Broadway, New York 544 Federal Office Building, San Francisco433 West Van Buren Street, Chicago 801 Federal Building,Seattle1 Chairmanship rotates annually. Commissioner Ayres will become chairman in January 1938.IILETTER OF SUBMITTALTo the Congress ofthe United States:I have the honor to submit herewith the Twenty-second Annual Report of the FederalTrade Commission for the fiscal year ending June 30, 1936.By direction of the Commission:CHARLES H. MARCH, ChairmanIIICONTENTS.INTRODUCTIONPagePowers and duties of the Commission 1General legal activities 5Trade-practice conferences 6General investigations 7Commissioners and their duties 9How commission work is handled 10Robinson-Patman Borah-Van Nuys Act 12Commission publications 15Recommendations 16PART I. GENERAL INVESTIGATIONSMilk and dairy products 21Agricultural income 27Steel sheet piling (collusive bidding) 30Textile industries 32Electric and gas utilities 34Petroleum decree 39Price bases--Range boiler industry 39PART II. GENERAL LEGAL WORKDescription of procedure 43Chart Facing p. 43Legal investigation 46Consolidations and mergers 47Cases settled by stipulation 50Representative complaints 51Orders to cease and desist 57Types of unfair competition 64Cases in the Federal courts 71Tabular summary of legal work 87PART III. TRADE PRACTICE CONFERENCESHistory and purpose of procedure 97Voluntary agreements 98Trade practice conference proceedings 98Outline of trade conference procedure 99Group I and group II rules 101PART IV. SPECIAL PROCEDURE IN CERTAIN TYPES OF ADVERTISING CASESNewspaper, magazine and radio ADVERTISING 105vVI CONTENTSPART V. FOREIGN-TRADE WORKPageProvisions of Export Trade Act (Webb-Pomerene law) 113Export associations in 1935 113Advantages in export trade combination 115Foreign Trade Series No.2 115Associations filing papers 115Trust laws and unfair competition abroad 116FISCAL AFFAIRSAppropriation acts providing funds for commission work 127Allotments from other appropriations 128Appropriations, allotments and expenditures 128APPENDIXESFederal Trade Commission Act 135Sherman Act 141Clayton Act 142Robinson-Patman Anti-Price Discrimination Act 145Export Trade Act 149Rules of practice 151Investigations, 1915-36 157Index 177INTRODUCTIONPOWERS AND DUTIES OF THE COMMISSIONGENERAL LEGAL ACTIVITIESTRADE PRACTICE CONFERENCESGENERAL INVESTIGATIONSCOMMISSIONERS AND THEIR DUTIESHOW COMMISSION WORK IS HANDLEDROBINSON-PATMAN BORAH-VAN NUYS ACTCOMMISSION PUBLICATIONSRECOMMENDATIONS1ANNUAL REPORTOF THEFEDERAL TRADE COMMISSIONINTRODUCTIONPOWERS AND DUTIES OF THE COMMISSIONThe Federal Trade Commission herewith submits its report for the fiscal year 1935-36. Organized March 16, 1915, under the Federal Trade Commission Act, approvedSeptember26,1914,theCommissionisanadministrativebodyexercisingquasi-judicialfunctions.Thesefunctionsarechiefly,(1)topreventunfairmethodsofcompetitionininterstatecommerce;(2)tomakeinvestigationsatthedirectionofCongress, the President, the Attorney General, or upon its own initiative; (3) to reportfactsinregardtoallegedviolationsoftheantitrustlaws;(4)topreventpricediscriminations,exclusivedealingcontracts,capitalstockacquisitions,andinterlockingdirectoratesinviolationoftheClaytonAct;and(5)topreventunfairmethods of competition in export trade in violation of the Federal Trade CommissionAct as extended by the Webb-Pomerene Act (Export Trade Act).During the fiscal year, the Commissions statutory authority was broadened by thepassage by the Congress, at its last session, of the Robinson-Patman Borah-Van NuysAct, Public, No. 692, approved June 19, 1936, amending section 2 of the Clayton Actmaking price discriminations unlawful.UndertheFederalTradeCommissionAct1thedutiesoftheCorn-missionaredivided into two broad classes, legal and economic.Legalactivitieshavelargelytodowiththepreventionandcorrectionofunfairmethods of competition in accordance with section 5 of the Commissions organic act,in which it is declared that unfair methods of competition in commerce are herebydeclared unlawful. This phrase is not further defined in the act. In the first case inwhich the Supreme Court had occasion to consider this language, namely, that of F.T. C. v. Gratz (253 U. S. 421), the Court associated with the phrase those practicesopposed to good morals be-1 Copies of the Federal Trade Commission Act, Sherman Act, Clayton Act, Robinson Patman Borah-Van Nuys Act, and Export Trade Act may be obtained on application to the Federal Trade Commissionor Government Printing Office, Washington, D. C.Texts of these acts also appear beginning at p.135 ofthis report.34 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSIONcause characterized by deception, bad faith, fraud, or oppression, or as against publicpolicy because of their dangerous tendency unduly to hinder competition or createmonopoly. In a later case, in which it had occasion to consider the phrase (F. T. C.v. R. F. Keppel Bro., Inc., 291 U. S. 304), the Supreme Court upheld, as involving anunfair method of competition, the Commissions order prohibiting the sale of candieslargely for ultimate resale through schemes of chance. The Court pointed out that indefiningthepowersoftheCommissionCongressadvisedlyadoptedthisphrase,which, as this Court has said, does not admit of precise definition, but the meaningand application of which must be arrived at by what this Court elsewhere has calledthe gradual process of judicial inclusion and exclusion. 2In another decision (A. L. A. Schechter Poultry Corp. et al. v. United States, 295 U.S. 495), the Supreme Court said: ** * What are unfair methods of competition arethus to be determined in particular instances, upon evidence, in the light of particularcompetitive conditions, and of what is found to be a specific and substantial publicinterest. ***In this general connection, it should be noted that under the pro-visions of section5oftheFederalTradeCommissionActtheCommissionistoproceedonlyifitappears to it that the particular proceeding would be to the interest of the public. Itaccordinglydoesnotconcernitselfwithpurelyprivatecompetitivecontroversieswhich have no public significance.Legal activities of the Commission, besides enforcement of its organic act, includeadministrationofsection2oftheClaytonAct,dealingwithunlawfulpricediscriminations,asamendedbytheRobinson-PatmanBorah-VanNuysAct,andsections 3, 7, and 8 of the Clayton Act dealing, respectively, with unlawful tyingcontracts, unlawful stock acquisitions, and unlawful interlockingdirectoratesThe Webb-Pomerene, or Export Trade Act, also administered by the Commission,has for its purpose the promotion of export trade. It exempts from the provisions of theantitrust laws associations of American exporters engaged solely in export trade.The economic work of the Commission arises chiefly under section 6 (a), (b), and(d) of the organic act giving the Commission power--(a) To gather and compile information concerning, and to investigate, from time to time, theorganization,business,conduct,practices,andmanagementofanycorporationengagedincommerce, excepting banks and common carriers,*** and its relation to other corporationsand to individuals, associations, and partnerships.2 Typical methods of competition condemned by the Commission as unfair are described on p. 64.GENERAL LEGAL ACTIVITIES 5(b) To require, by general or special orders, corporations engaged in commerce, exceptingbanks,andcommoncarrierssubjecttotheacttoregulatecommerce,***tofilewiththeCommission in such form as the Commission may prescribe annual or special, or both annualan special, report or answers in writing to specific questions, furnishing to the Commission suchinformation as it may require as to the organization, business, conduct, practices, management,and relation to other corporations, partnerships, and individuals of the respective corporationsfiling such reports or answers in writing.***(d) UponthedirectionofthePresidentoreitherHouseofCongress3toinvestigateandreport the facts relating to any alleged violations of the antitrust acts by any corporation.Also under section 6 (h) of the Federal Trade Commission Act, the Commission haspower--toinvestigate,fromtimetotime,tradeconditionsinandwithforeigncountrieswhereassociations,combinations,orpracticesofmanufacturers,merchants,ortraders,orotherconditions, may affect the foreign trade of the United States, and to report to Congress thereon,with such recommendations as it deems advisable.GENERAL LEGAL ACTIVITIESUnderauthorityoftheFederalTradeCommissionActandthosesectionsoftheClaytonActwhichitadministers,theCommission,duringthelastfiscalyear,hascontinued to direct its efforts toward the correction and elimination of unfair methodsof competition and other unlawful practices.It made preliminary investigations in 1,827 individual casesinitiated under theseacts as compared with 1695 during the last pre-ceding year, and approved a total of890 stipulations, of which 555 were of a special class in which false and misleadingadvertisinginnewspapers,magazines,orbyradiobroadcasts,wastheprincipalpractice involved.This was an increase of more than 100 percent over the total of 431stipulations negotiated in the last preceding fiscal year.Thestipulationprocedureisusuallyemployedincaseswherethemethodsofcompetition complained of are not so fraudulent or vicious that protection of the publicinterest requires the procedure of formal complaint and issuance of a cease and desistorder,asthestipulationprocedureprovidesanopportunityfortheprospectiverespondenttoenterintoawrittenagreementtoceaseanddesistfromtheunfairmethods set forth therein.During the last fiscal year, the Commission issued 386 complaints against companiesand individuals, alleging various forms of unfair3 Public, No, 78, 73d Cong., approved June 16, 1933, making appropriations for the fiscal year endingJune30.1934,fortheExecutiveofficeandsundryindependentexecutiveBureaus,Boards.Commissions, etc.. made the appropriation for the Commission contingent upon the provision (48 Stat.291, 15 U. S. C. A., sec. 46a) that hereafter no new investigations shall be initiated by the Commissionas the result of a legislative resolution, except the same be a concurrent resolution of the two Houses ofCongress.6 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSIONcompetition or other practices, as compared with 280 issued during the last precedingyear. In 161 cases, the Commission served upon respondents its orders to cease anddesist from unfair practices which had been alleged in complaints and which werefound to have been engaged in by the respondents, as compared with 126 issued duringthe last preceding year. Representative cases are described at pages 51 and 57.Duringtheyear,theCommissionwassustainedin15casesbeforethevariousUnited States circuit courts of appeals, and was reversed in none. In the United StatesSupreme Court, there were no decisions on the merits in pending Commission cases,but that Court denied petitions for writs of certiorari applied for by three petitionerswhohadbeenunsuccessfulintheirattemptsincircuitcourtsofappealstonullifyCommission orders to cease and desist.A number of American associations engaged solely in export trade filed with theCommission statements provided for by the Webb-Pomerene law or Export Trade Actand thereby became entitled to the benefits and exemptions provided by that act. Theseare discussed elsewhere in this report.For handling a special procedure in certain types of false and mis-leading advertisingcases,theCommissionhasaspecialboardofinvestigationconsistingofthreeattorneys.Throughthisspecialboard,theCommissionexaminestheadvertisingcolumnsofnewspapersandmagazinesandcommercialadvertisingcontinuitiesbroadcast by radio, noting any misleading representations appearing in this material.Complaints against advertisers are also received from the public and are given carefulconsideration. Misleading representations in advertising are often corrected throughtheadvertisersagreementbystipulationtoceaseanddesistfromsuchmisrepresentations, although some of the cases before this board result in the issuanceof formal complaints and orders to cease and desist.TRADE PRACTICE CONFERENCESAn important phase of the Commissions activities during the last year has been itstrade practice conference work. This work was instituted in 1919. By 1926, it hadgrown to such importance that the Commission established what is now known as theDivision of Trade Practice Conferences.The Commissions trade-practice conference procedure affords a means by whichmembers of trade and industry may voluntarily cooperate in the establishment of acodeoffair-tradepracticesforthewholesaleeliminationofunfairmethodsofcompetition, trade abuses, and evils from trade and industry. This function is per-GENERAL INVESTIGATIONS 7formedunderauthorityoftheFederalTradeCommissionActunderwhichtheCommission isempowered and directed to prevent persons, partnerships, or corporations, except banks andcommoncarrierssubjecttotheactstoregulatecommerce,fromusingunfairmethodsofcompetition in commerce. Since the inauguration of this work, trade-practice proceedings for more than 170industries have been instituted for the establishment of rules under the sponsorship ofthe Commission. These industries are of varied character, the membership rangingfrom a few hundred to many thousand.GENERAL INVESTIGATIONSUnder authority of section 6 of the Federal Trade Commission Act, the Commissionmay gather information concerning corporations and investigate their organization andoperationsandmay,attherequestofthePresident,theCongress,theAttorneyGeneral, or upon its own initiative, conduct general investigations of alleged violationsof the antitrust laws. It also may make reports in aid of legislation.Morethan100generalinquiriesorstudieshavebeenconductedduringthecommissionsexistence,mostoftheminpursuanceofCongressionalresolutions,although many have been conducted pursuant to Presidential orders and others on thecommissions initiative.4 It may be said that these inquiries have supplied not onlyvaluableinformationbearingonconditions,developments,andtrendsininterstatetrade and industrial development, but have thrown light on the need for and wisdomof legislation for corrective action. The public need for such fact-finding studies in thisincreasingly complex economic era grows greater, irrespective of different economicand political philosophies.The status of each investigation in progress at the close of the fiscal year is describedas follows:Milkanddairyproducts.--Duringthefiscalyear,thecommissioncontinueditsinvestigation into conditions with respect to the sale and distribution of milk and otherdairyproducts,underauthorityoflouseConcurrentResolution32,Seventy-thirdCongress, second session, adopted June 15, 1934.During the year it transmitted toCongressthefollowingreports:SaleandDistributionofMilkandMilkProducts,being a supplemental study of the Connecticut and Philadelphia milkshed; Sale andDistribution of Milk and Milk Products, Chicago Sales Area; Milk Market Regulationand Practices of Distributors in Relation to Margins, Costs and Profits of4 A list of these investigations, and brief descriptions, begin at p.157.8ANNUAL REPORT OF THE FEDERAL TRADE COMMISSIONDistributors in Boston, Baltimore, Cincinnati, and St. Louis; and Sale and Distributionof Milk and Milk Products, Twin Cities Area (Minneapolis and St. Paul).Agriculturalincome.-PublicResolutionNo.61,Seventy-fourthCongress,firstsession, approved August 27, 1935, directed the Commission to investigate and reportto Congress concerning the extent of the decline in agricultural income in recent years;the extent of increases or decreases in the income of principal corporations engagedin the sale, manufacture, warehousing, and processing of principal farm products; theproportionoftotalconsumercostofrepresentativefarmproducts,representedbyprofits to the farmers, manufacturers, processors, warehousemen and distributors ofsuch products, and other facts. Seven principal farm commodities were chosen forinvestigation as comprising the leading sources of agricultural income; namely, dairyproducts, cotton, wheat, cattle, hogs, tobacco, and potatoes. an interim report was filedby the commission January 1, 1936. A resolution adopted by the Congress at its lastsessiondirectedaninvestigationoftableandjuicegrapesandfreshfruitsandvegetables, an interim report on these commodities to be filed on or before January 31,1937, and a final report not later than May 31, 1937.Farmimplementsandmachinery.-Investigationofcorporationsengagedinmanufacturing,selling,ordistributingagriculturalimplementsandmachinerywasundertaken by the Commission at the close of the fiscal year in response to PublicResolution No. 130, Seventy fourth Congress, approved June 24, 1936. Under thisresolution, the Commission will seek to determine "whether any corporation engagedin the manufacture, sale, or distribution of agricultural implements and machinery, ofwhatever kind and description is, or within the past 3 years has been, violating any ofthe antitrust acts of the United States, and the nature, extent, and effects of any suchviolation."Otherinformationrequestedundertheresolutionrelatesspecificallytopossible price fixing, monopoly,and concentration of ownership or control; costs,prices, and profits of manufacturers and other subjects.Collusivebidsonsteel-sheetpiling.-AtthedirectionofthePresident,theCommissioninvestigatedthecircumstancesunderwhichproducersofsteel-sheetpilinghadsubmittedidenticalbidsonconstructionprojectsfinancedwithFederalfunds in New York City, Miami, Fla., and Morehead City, N . C. A description of theCommissions report is presented on page 30. Textile industries.-As a result of this investigation, undertaken pursuant to Executiveorder of September 26, 1934, the Commission has issued reports relative to labor costs,rates of return, and invest-THE COMMISSIONERS AND THEIR DUTIES9ments of companies and establishments in the cotton, woolen and worsted, silk andrayon, and the thread, cordage, and twine industries.Electric and gas utilities.--This investigation, conducted under Senate ResolutionNo. 83, Seventieth Congress, first session, was completed as of December 31, 1935,and final reports have been submitted on the financial operations of electric powerutilities, publicity and propaganda activities of the utility industries, and on financialphasesofthenatural-gasandpipe-lineindustries,withconclusionsandrecommendations in each instance.The inquiry embraced examination of 29 holdingcompanies, 70 subholding companies, and 278 operating companies having combinedtotalassetsof$19,038,698,378.Testimonyandreports,includingfinalsummaryreports, comprise 94 printed volumes.Petroleum decree investigation.--At the close of the fiscal yen r, the Commissionwas conducting an investigation to determine the manner in which a, consent decreeentered in the case of the Government against certain Pacific coast oil companies hasbeen observed. This investigation was requested by the Attorney General and is beingconducted pursuant to duty imposed upon and power granted to the Commission undersection 6 (c) of the Federal Trade Commission Act.Pricebases-range-boilerindustry.--TheCommission,onMarch30,1936,transmitted to Congress a report of its study of the zone-price formula in the range-boiler industry. This was one of a series of studies made by the Commission in itsprice-bases inquiry to ascertain the part that transportation charges play in the makingofdeliveredandshipping-pointprices.Thestudydisclosedthatthebasing-pointprinciple is involved in the making of prices in the range-boiler industry.THE COMMISSIONERS AND THEIR DUTIESThe Federal Trade Commission is composed of five Commissioners appointed bythe President and confirmed by the Senate. Not more than three of the Commissionersmay belong to the same political party.The term of office of a Commissioner is 7 years, as provided in the Federal TradeCommission Act. The term of a Commissioner dates from the 26th of September lastpreceding his appointment (September 26 marking the anniversary of the approval ofthe act in 1914), except when he succeeds a Commissioner who relinquishes officeprior to expiration of his term, in which case, under the act, the new member shall beappointed only for the unexpired term of the Commissioner whom he shall succeed.At the close of the fiscal year, June 30, 1936, the Commission was composed of thefollowing members: Charles H. March, Republican,10 ANNUAL REPORT OF THE FEDERAL TRADE COM MISSIONofMinnesota,chairman;WilliamA.Ayres,Democrat,ofKansas,vice-chairman;Garland S. Ferguson, Jr., Democrat, of North Carolina; Ewin L. Davis, Democrat, ofTennessee;andRobertEFreer,Republican,ofOhio.CommissionerFreerwasappointed to office August 24, 1935.Each January the Commission designates one of its members to. serve as chairmanduring the ensuing calendar year. Commissioner March was chosen chairman for thecalendar year 1936, succeeding Commissioner Davis. The chairmanship rotates, so thateach Commissioner serves as chairman at least once during his term of office. Thechairman presides at meetings of the Commission, supervises its activities, and signsthe more important official papers and reports at the direction of the Commission. Thechairman of the Commission is a member of the National Emergency Council.In addition to the general duties of the Commissioners, in administering the statutes,the enforcement of which is committed to the commission, each Commissioner hassupervisorychargeoadivisionoftheCommissionswork.ChairmanMarchhassupervisorychargeofthechiefexaminersdivision;CommissionerAyresoftheadministrative division; Commissioner Ferguson of the chief trial examiners divisionand the trade practice conference division; Commissioner Davis of the chief counselsdivisionandthespecialboard0investigation;andCommissionerFreeroftheeconomic division. Every case that is to come before the Commission is first examinedby a Commissioner and then reported on to the Commission, but all matters under thejurisdiction of the Commission are acted upon by the Commission as a whole.The Commission meets regularly for the transaction of business. every business dayat its offices in Washington. The Commissioners hear final arguments in the casesbeforetheCommission,aswellasargumentsonmotionsofcounselfortheCommission or respondents.The Commissioners usually preside individually at trade-practice conferences heldfor industries in various parts of the country, and also have numerous administrativeduties incident to their position..The secretary of the Commission is its administrative officer.AtthecloseofthefiscalyeartheCommissionhadatotalpersonnelof571,including the Commissioners.HOW THE COMMISSIONS WORK IS HANDLEDTheworkoftheFederalTradeCommissionmaybedividedbroadlyintothefollowing general groups: Legal, economic, and administrative.The legal work of the Commission is under the direction of the chief counsel, thechief examiner, and the chief trial examiner.SHOW THE COMMISSIONS WORK IS HANDLED 11The chief counsel acts as legal adviser to the Commission, and has charge of legalproceedingsagainstrespondentschargedwithunfairmethodsofcompetitionasprohibited by the Federal Trade Commission Act, with acts or practices in violationoftheClaytonActandwithviolationsoftheFederalTradeCommissionActasextended by the Webb-Pomerene Act, and has charge of the trial of cases before theCommission and in the courts.The chief examiner has charge of legal investigations of applications for complaintalleging violations of the laws over which the Commission has jurisdiction.When theCommissionundertakesinvestigationsinresponsetocongressionalresolutions,orunder section 6 of the Federal Trade Commission Act, the chief examiner supervisessuchpartsofsuchinvestigationsasmaybeassignedtohisdivisionbytheCommission.Members of the chief trial examiners division are appointed to preside at the trialof formal complaints and at the taking of testimony in investigations conducted byExecutive direction, pursuant to congressional resolutions, upon the Commissionsown initiative, or at the request of the Attorney General of the United States. They alsoarrange settlement by stipulation of applications for complaint, subject to approval ofthe Commission.Therearealsothedivisionoftradepracticeconferences,thespecialboardofinvestigation for cases involving false and misleading advertising, and the export-tradesectionofthechiefcounselsdivisionforhandlingforeigntradeworkundertheExport Trade Act and section 6 (h) of the Federal Trade Commission Act.The economic division, under the chief economist, conducts certain of the generalinquiries of the Commission. This division conducted that part of the electric and gasutility inquiry which dealt with the financial structure, organization, and managementof the utilities, although the chief counsels division conducted the public hearings andhad charge of the investigation of utility propaganda.The investigation of the textileindustry has been under the direction of the economic division. The milk investigationandtheagriculturalincomeinquiryhavebeenconductedbythechiefexaminersdivisionandtheeconomicdivision,jointly.Thepublichearingsheldinthemilkinvestigation were conducted by the chief counsels division before a Commission trialexaminer.Responsible directly to the assistant secretary of the Commission, the administrativedivision conducts the business affairs of the Com mission and is made up of units suchas are usually found in Government establishments, the functions of such units beingcovered largely by general statutes. These units are as follows: Accounts and per99567---36-----212 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSIONsonnel,disbursingoffice,docketsection,publications,library,mailsandfiles,supplies, stenographic, and hospital.The Commission has a public relations and editorial service for the distribution ofinformation, for the preparation and editing of reports, and the answering of inquiriesrelativetotheCommissionswork.Thisdivisionisunderthesupervisionoftheassistant to the chairman.THE ROBINSON-PATMAN BORAH-VAN NUYS ACTTheRobinson-PatmanBorah-VanNuysAct,Public,No.692,wassignedbythePresident on June 19, 1936.TheRobinson-Patmanbill,asoriginallyintroduced,amendedSection2oftheClayton Act, defining unlawful price discriminations and supplemented the section bydeclaring certain other forms of discrimination to be unlawful.The Borah-Van Nuysbill was directed toward making certain price discriminations a criminal offense.Bothbillsweredesignedtopreventarbitrarydiscriminationinthecourseofinterstatecommerceasaresultofwhichsellersconferredsubstantialcompetitiveadvantagesuponsomecustomersandnotuponothers,orassometimesstated,torestore equality of opportunity in business without penalizing service and efficiency.Asfinallypassedtheactisaconsolidationoftheprovisionsofthevariousbillsintroduced in Congress by Senator Robinson, Representative Patman, Senators Borah,Van Nuys, and others.A comparison of the principal provisions of the amended section and of the sectionasithadstoodsinceitsoriginalenactmentin1914,ispresentedinthefollowingparallelcolumns.Thiscomparisonwillshowtheprincipalpointsofdifferencebetween the old and the new law.ORIGINAL SECTION 2 AMENDED SECTION 2NOTE.--New Language in italics.)Declares it unlawful to discriminate Declares it unlawful to discriminatein price in the course of interstate com- in price in the course of interstate com-merce between different purchasers of merce between different purchasers ofcommodities sold for use, consumption, like grade and quality, where either oror resale within the United States, sub- any of the purchases are made in theject to the following requirements: course of interstate commerce andwhere the commodities are sold for use,consumption, or resale within theUnited States or its possessions, subjectto the following requirements(a) That the effect may be to sub- (a) That the effect may be substantially lessen competition or tend to stantially to lessen competition or tendcreate a monopoly in any line of corn- to create a monopoly in any line ofmerce. commerce, or to injure, destroy, or pre-vent competition with any person whoeither grants or knowingly receives thebenefit of such discrimination or withcustomers of either of them.THE ROBINSON-PATMAN BORAH-VAN NUYS ACT 13ORIGINAL SECTION 2 AMENDED SECTION 2(b)That the discrimination be not (b) That the discrimination makeon account of differences in the grade, other than due allowance for differ-quality, or quantity of the commodity ences in the cost of manufacture, sale,sold or make other than due allow- or delivery resulting from the differentance for difference in the cost of selling methods of quantities in which suchor transportation. commodities are to such purchasers soldor delivered. (c) That the discrimination in the (c) The amended section does notsame or different communities be not contain the equivalent to (c) in thein good faith to meet competition. other column, but provides that as amatter of proof a prima facie case ofdiscrimination may be rebutted by theseller showing that his lower price orthe furnishing of services or facilitiesto any purchaser or purchasers wasmade in good faith to meet an equallylow price of a competitor, or the serv-ices or facilities furnished by a competi-tor. (d) That the discrimination be not (d) That the discrimination be notthe result of the sellers selection of the result of the sellers selection ofcustomers in bona tide transactions customers in bona fide transactionsand not in restraint of trade. and not in restraint of trade.(e)Nothing equivalent to (e) in the(e) That the discrimination be notother column appears in the original the result of price changes from thesection. to the wh ere in response to changingconditions affecting the market for orthe marketability of the goods con-cerned, such as, but not limited toactual or imminent deterioration of per-ishable goods, obsolescence of seasonalgoods, distress sales under court Proc-cess, or sales in good faith in discontinuanceofbusiness inthegoodsconcerned.An important provision which qualifies (b) in the second column above is that wherethe Federal Trade Commission finds that available purchasers in greater quantitiesaresofewastorenderdifferentialsonaccountthereofunjustlydiscriminatoryorpromotive of monopoly in any line of commerce it may, after due investigation andhearing to all interested parties, fix and establish quantity limits and revise the sameasitfindsnecessary,astoparticularcommoditiesorclassesofcommodities.Thereafter in such cases differentials based on differences in quantities greater thanthose so fixed and established are not permissible.The new act includes some important provisions that are in the nature of extensionsoftheprincipleofnondiscrimination.Theseextensionsareindependentoftheprohibition against the discriminations in price as such. The methods forbidden wereevidently considered as either constituting indirect price discrimination or other formsof discrimination which had effects similar to price discriminationThe payment ofbrokerage, commission, or other compensation in lieu thereof to an intermediary isforbidden, except for services rendered, where the intermediary is acting in fact foror in behalf, or14 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSIONis subject to the direct or indirect control of any party to the transaction other than theone paying the intermediarys compensation. Allowances for advertising and sales-promotionworkaredeclaredunlawfulunlesstheyaremadeavailableonproportionally equal terms to all customers who compete with one another. It is alsodeclaredunlawfultodiscriminatebetweenpurchasersofacommodityboughtforresalebyfurnishinganyservicesorfacilitiesforprocessing,handling,selling,orofferingforsale,thatarenotaccordedtoallpurchasersonproportionatelyequalterms.Thenewactspecificallydeclaresitunlawfulforanypersonengagedincommerce knowingly to induce or receive a discrimination in price that is prohibitedby the amended section 2. The new act affirmatively protects the right of a cooperativeassociationtodistributeitsearningsinproportiontothevolumeofdealingsofitsrespective members.As an aid to more effective enforcement of section 2 of the act, the act provides thatwhen the Commission shall have established a prime facie case of discrimination inprice or services or facilities the burden of rebutting such a case shall be upon theallegedviolatorandunlessjustificationshallbeaffirmativelyshowntheCom-mission may order the discrimination terminated. The theory of this provision is thatthe facts which constitute justification are necessarily in the possession of the allegeddiscriminator. The act preserves all rights of action arising, litigation pending, andorders of the Federal Trade Commission, based on section 2 of the Clayton Act, issuedand in effect, or pending on review prior to passage of the new act.Provision is madefor reopening of proceedings concluded under the old law and the modification oramendment of the Commissions original orders to include any violations found of thenew law. Court review is provided for as in the case of the old law.Section 3 of the new act makes it a criminal offense and provides. a penalty of fineor imprisonment of persons who knowingly discriminate or assist in discriminating.This section, however, sets up a definition of criminal discrimination which is notidentical with the definitions of discrimination contained in sections 2A to F, inclu-sive, of the new act. Section 3 of the new act also makes it a criminal offense to sellgoods in any part of the United States at prices lower than elsewhere in the UnitedStates for the purpose of destroying competition or eliminating a competitor. It is alsoacriminaloffensetosellgoodsatunreasonablylowpricesforthepurposeofdestroying competition or eliminating a competitor.Authority to enforce compliance with the new act, as distinguished from criminalproceedings, is by virtue of section 11 of the Clayton Act vested in the Commissionin all cases in which the new act is not applicable to common carriers subject to theInterstate Com-PUBLICATIONS OF THE COMMISSION 15merce Act, as amended, to common carriers engaged in wire or radio communicationorradiotransmissionofenergy,ortobanks,bankingassociations,andtrustcompanies.TheInterstateCommerceCommissionhasauthoritytoenforcecompliancebycommoncarrierssubjecttotheInterstateCommerceActasamended;theFederalCommunications Commission has authority to enforce compliance in cases applicableto common carriers engaged in wire or radio communication or radio transmission ofenergy; while the Federal Reserve Board has authority to enforce compliance wherethe act is applicable to banks, banking associations, and trust companies.Other proceedings for violation and threatened violation of the new act are providedfor by other sections of the Clayton Act.Undersection15,theDepartmentofJusticeisgiventherighttoinstituteproceedingstopreventandrestrainviolationsofthenewactandtherightofanyperson, firm, corporation, or association for injunctive relief against threatened lossor damage by violation of the new act is provided in section 16 of the Clayton Act,exceptingthatrighttoinjunctivereliefforthreatenedlossordamagemaynotbebrought against any common carrier subject to the regulation, supervision, or otherjurisdiction of the Interstate Commerce Commission.In addition to proceedings which may be instituted to enforce compliance with, andto restrain violations of section 2 of the Clayton Act, as amended by the new act, aperson who is injured in his business or property by reason of violations of that sectionmay sue for threefold damages and cost of suit, including a reasonable attorneys fee.This is provided by section 4 of the Clayton Act.PUBLICATIONS OF THE COMMISSIONPublications of the Commission, reflecting the character and scope of its work, varyin content and treatment from year to year, especially documents relating to generalbusiness and industrial inquiries.5Such studies are illustrated by appropriate charts, tables, and statistics.These fact-finding studies , reports, and recommendations dealnot only with current developments, possible abuses, and trends in an industry, butcontainscientificandhistoricalbackground.Consideredasawhole,theyhavesupplied economists and students of business and government, the Congress , and thepublic with information not only of general interest but of great value as respects theneed or wisdom of new and important legislation, to which they have frequently led,as well as corrective action by the Department of Justice and private interests affected.The Supreme Court has5 These investigations are listed and briefly described beginning at p.157.16 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSIONat times had recourse to them, and many of them have been designated for reading inconnection with university and college courses in economics and law.FindingsandordersoftheCommission,aspublished,containinterestingandimportant material regarding business and industry. They tell, case by case, the storyof unfair competition, exclusive-dealing contracts, price discriminations, and capital-stock acquisitions in violation of the statutes which the Commission ad-ministers, andof the measures taken by the Commission to prevent such violations of law.The Commissions decisions are printed first in the form of advance sheets withpermanent volume number and pagination, and later as bound volumesRegardingtheCommissionspublications,theFederalTradeCommissionAct,session 6 (f) , says the Commission shall have power--tomakepublicfromtimetotimesuchportionsoftheinformationobtainedbyithereunder, except trade secrets and names of customers, as it shall deem expedient inthepublicinterest;andtomakeannualandspecialreportstotheCongressandtosubmit therewith recommendations for additional legislation; and to provide for thepublicationofitsreportsanddecisionsinsuchformandmannerasmaybebestadapted for public information and use.RECOMMENDATIONSInsubmittingthisannualreport,theCommissionavailsitselfoftheaboveauthorizationtorenewcertainrecommendationsforadditionallegislation.Theserecommendations are based upon the Com missions experience in administering andenforcing the remedial laws committed to its jurisdiction.TheCommissionrecommendsthatthefirsttwoparagraphsofsection5oftheFederal Trade Commission Act be amended to read as follows:SEC.5.Unfairmethodsofcompetitionincommerceandunfairordeceptiveactsandpractices in commerce are hereby declared unlawful.TheCommissionisherebyempoweredanddirectedtopreventpersons,partnerships,orcorporations, except banks, and common carriers subject to the acts to regulate commerce, fromusing unfair methods of competition in commerce and unfair or deceptive acts and practicesin commerce. [New language in italics.]Inmanycasesitisverydifficult,ifnotimpossible,toshowaspecificinjurytocompetitors, even though injury to both competitors and the public is manifest.Thedevelopmentofsuchevidence-involvesmuchtimeandexpense.TheGovernmentshould not be subjected to this expense.RECOMMENDATIONS 17Intheinterestofexpeditionandconsistencyinenforcementofitsorders,theCommission renews its recommendation that section 5 affirmatively provide that courtreview may be obtained by the Com-mission without first proving the order has beenviolated and that upon affirmance the court shall issue its own decree commandingobediencetotheCommissionsorder.TheCommissionalsorenewsitsrecommendation that its orders shall become final and conclusive and violation thereofpunishable as a contempt of court if ft respondent does not apply for court reviewwithin sixty (60) days after the order is issued.PART I. GENERAL INVESTIGATIONSMILK AND DAIRY PRODUCTSAGRICULTURAL INCOMESTEEL SHEET PILING (COLLUSIVE BIDDING)TEXTILE INDUSTRIESELECTRIC AND GAS UTILITIESPETROLEUM DECREE INVESTIGATIONPRICE BASES-RANGE BOILER INDUSTRY19PART I. GENERAL INVESTIGATIONSMILK AND DAIRY PRODUCTSREPORT SUBMITTED ON TRADE CONDITIONS IN SEVERAL AREASAn inquiry into conditions with respect to the sale and distribution of milk and otherdairy products was ordered by Congress under House Concurrent Resolution No. 32,Seventy-third Congress, second session, adopted June 15,1934.Underthisresolution,theCommissionwasdirectedtodeterminewhetheranypersons, partnership, association, , cooperative or corporation is operating within anymilkshed of the United States in such a manner as to substantially lessen competition01. tend to create a monopoly in the sale or distribution of such dairy products * * *The resolution also directed the Commission to ascertain whether such person ororganization is a party to any conspiracy in restraint of trade or commerce in any suchdairy products, or is in any way monopolizing or attempting to monopolize such tradeorcommercewithintheUnitedStatesoranypartthereof,alsowhetheranysuchperson or organization is using any unfair methods of com-petition in connection withthesaleordistributionofanysuchdairyproducts,orisinanywayoperatingtodepress the price of milk sold by producers.The Commission, on April 5, 1935, transmitted to Congress its first report on thisinvestigationentitledSaleandDistributionofMilkProducts,ConnecticutandPhiladelphia Milksheds, later printed as House Document No. 152, Seventy-fourthCongress, first session. This report was summarized in the Commissions annual reportfor 1935.A supplemental report, Sale and Distribution of Milk and Milk Products, discussingcertain problems encountered in the Connecticut and Philadelphia milksheds, was sentto Congress as of December 31, 1935, and later printed as House Document No.387,Seventy-fourth Congress, second session.Other reports on the milk investigation issued during the fiscal year 1935-36 were:Sale and Distribution of Milk and Milk Products, Chicago Sales Area, April 15,1936.2122 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSIONMilk Market Regulations and Practices of Distributors in Relation to Margins,Costs and Profits of Distributors in Boston, Baltimore, Cincinnati, and St. Louis,June 4, 1936.Sale and Distribution of Milk and Milk Products, Twin Cities Area, June 15,1936.Factsandconditionspresentedinreportsissuedduringthefiscalyeararesummarized as follows:Supplemental report, Connecticut and Philadelphia areas.--Philadelphia the theoryof paying for milk purchased from producers on the basis of use by the distributors,under the base surplus plan, was largely nullified by a practice not in accord with theutilization theory. Instead of most of the distributors settling with each producer on thebasis of utilization of milk, settlement was made according to the proportion of eachproducers basic quantity up to 100 percent of such quantity which was delivered bysuch producer.This practice was described as a grave abuse because, to the extent that producersfailed to ship their basic quantities or quotas, the distributors were able to use, as classI milk (milk sold for consumption in fluid form), deliveries made by other producersin excess of their basic quantities, the excess being paid for at the lower surplus rate.In Connecticut, however, producers were generally paid under the base surplus planinaccordancewiththeactualutilizationofmilkbydistributors.ThemethodofsettlementusedinConnecticut,whenproperlyadministered,assurespaymenttoproducers in accordance with the distributors utilization and thus prevents the latterfrom obtaining a part of their fluid milk requirements at surplus prices.Another contrast noted between the two milksheds was the failure of the InterstateMilk Producers Association, operating in the Philadelphia milkshed, adequately toprotect the interests of its members. either in respect to milk settlements or in respectto producers basic quantities under the base surplus plan, whereas the ConnecticutMilk Producers Association was far more successful in protecting the interests of itsmembers.Another important contrast between the Connecticut and Philadelphia milkshedsdiscussed in the report was in connection with the differences between the prices paidproducers for class I milk and the prices for the lower classes, or surplus milk, in therespective sheds. In Connecticut this spread was wide and made it profitable for flat-price distributors to operate, whereas in Philadelphia the-relationship between the twoprices was much narrower than in Connecticut and flat-price buyers were much lessimportant, relatively.The report pointed out the possible effects upon general marketconditions of these price relationships.MILK AND DAIRY PRODUCTS 23Rates of return on total milk investment for nine Connecticut distributing companiesexamined declined from about 19 percent to a little more than 6 percent from 1931 to1933. This decline is accounted for chiefly by the progressive decrease in the sales ofmilk and milk products.The average rate of return for the whole 4-year period (1930to 1933) was 14.14 percent, which shows that, despite the depression extending overthese years, the dealers were still making a profit, some of them in fact a high rate ofreturn.For Philadelphia, the rates of return for seven distributing corn-panics examinefellfrom about 20 percent in 1930 to less than 6 percent in 1934.Thereportalsopointedouthowcostsmaybesoallocatedinthedistributorsaccountingastoshowvaryingresultsfortheseveralproductshandledbymilkdistributors.The report discussed the difficulties of determining costs per unit of delivery onwholesale and retail routes and suggested the desirability for the industry of devisingsomestandardsystemofaccumulatingandallocatingdeliverycostsinorderthataccurate and comparable information might be available on this important expenseitem.The gross spread or margin per quart on all milk products sold by 3 Connecticutdistributors was $0.03427 as compared with $0.05262 for 10 Philadelphia distributors.The difference between these results for the two milksheds was influenced by the factthat the Connecticut companies sold substantial quantities of both fluid cream andother products to affiliated companies at cost, thus reducing the margin per quart forboth items.There was comparatively little difference between the two markets in therespective spreads on fluid milk.Sale and distribution of milk products, Chicago sales area.--The Chicago sales areahad a yearly requirement of approximately 430,000,000 quarts of fluid milk, producedchiefly in northern Illinois, northern Indiana, and southern Wisconsin.The Pure Milk Association was the principal producers organization in that area.Priortoadoptionofanewsalesagreement,November1,1935,betweentheproducers organization and distributors, the base and surplus plan of paying producerswas in effect.Under this plan each producer was paid class I, or fluid milk prices, for a certainpercentage of his base allotment, based on his average production during September,October, and November 1929. Producers have not had opportunity to reestablish basicssince 1929. The percentages of base allotment on which fluid milk prices were allowedwerefixedarbitrarilybyagreementbetweenthecooperativeassociationandthedistributors.24 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSIONThe sales contract in force since November 1, 1935, provided for flat prices, basedonpricespaidformilkusedinthemanufactureofevaporatedorcondensedmilk.Prices paid for milk used in the production of evaporated milk are computed by the useof an arbitrary formula based on the current price of 92 score butter on the Chicagomarket in combination with the current weekly price of twins cheese quoted on theWisconsinCheeseExchangeatPlymouth,Wis.Thepriceoftwinscheeseisdetermined at a 15 minute meeting at Plymouth, Wis., each week, of a, few large dairyand meat packing companies, constituting the active members of the cheese exchange,atwhichasmallquantityofcheeseissold,notforthepurposeofsupplyinganydemand therefor, but for the purpose of fixing the price for the following week.Two large dairy products corporations distributed fluid milk in the Chicago salesarea--TheBordenCo.andBowmanDairyCo.WhiletheNationalDairyProductsCorporation distributed no fluid milk in the Chicago market, it had a wholly ownedsubsidiary, Kraft Phoenix Cheese Corporation, a large purchaser of raw milk fromfarmers in the production area accessible to Chicago, engaged in the manufacture ofcheese.The Borden Co., through its subsidiary, Borden-Wieland, Inc., and Bowman DairyCo., sold approximately 49 percent of the fluid milk sold in Chicago, and handlednearly 68 percent of the fluid milk sold there by all dealers purchasing under contractfrom the Pure Milk Association.The records and files of the Milk Dealers Bottle Exchange, operating in the Chicagoarea,indicatedthatitwasorganizedbyandoperatedforthebenefitofthelargedistributorsandsuchotherdistributorsascooperatedwiththeminmaintaininguniformpracticesandstabilizedprices.ThetwolargestfluidmilkdistributorsinChicago owned a controlling interest in the outstanding voting stock of the exchange.Facts were also developed indicating that officials and members of the Milk WagonDrivers Union, through intimidation, threats and violence, had frequently interferedwith the work of employees of independent milk distributors of Chicago.Drivers forindependent dealers had been refused membership in the union because such dealerscut prices. The two large milk distributors in Chicago employed a majority of unionmembers.Unionofficialstriedtogetmilkpeddlerssellingmilkforindependentdistributors either to sell their business or buy milk from Borden-Wieland, Inc.Files and records of the Chicago Board of Health revealed that requirementsforimprovementsonmanydairyfarmsworkedhardshipsonsmallproducers.Whileevidence was found in a few casesMILK AND DAIRY PRODUCTS 25of favoritism in granting extensions of time for making required changes, no evidenceofcollusiononthepartofofficialswitheithertheproducerscooperativesorthedistributors was developed, not withstanding the wide circulation of rumors that suchcollusion existed.Boston,Baltimore,Cincinnati,andSt.Louisreport.--Thisreportcontained,inaddition to some discussion of control measures, an analysis of the unit margins, costs,andprofitsofcertaindistributors,andofthemilksettlementplansusedinpayingproducers. A number of practices engaged in by these distributors which had a decidedeffectontheirmarginswerealsoshown.Acomparisonofmethodsofallocatingdelivery expenses to products was presented, with some critical comment upon theirvalue.The report will prove of value to those entrusted with formulating milk marketingcontrol measures, and officials administering control acts will likewise find it helpful.As appears in the report, conditions among milk producers, in the areas from whichthese four cities obtained milk, varied greatly. Conditions in the Boston market weresaidtohavelongbeenunstable,and,whiletheeffortsoftheFederalMarketAdministrator and the Massachusetts Board of Milk Control had done much to im-prove conditions in that milkshed, there continued to be dissatisfaction among manyproducers,especiallyinMassachusetts.AsinBoston,conditionsintheCincinnatimilkshed, especially prior to the existence of the Ohio Milk Marketing Commission,were unstable, and this was also true of conditions in the St. Louis area. The reportdiscussedpossiblereasonsfortheconditionswhichexistedinthefourmilkshedscovered by the report and also pointed out a number of abuses which had existed fromtime to time.The comparatively greater stability of the Baltimore milk market might be ascribedto the fact that the only cooperative in the milkshed had kept the price and surplusproblems at a minimum, and also because of the comparatively few milk distributorsoperatingintheBaltimoresalesarea.Furthermore,theimportanceofmaintainingproper relationships between class and blended prices was fully recognized.The methods used by distributors for settlement with producers for milk in the fourmarkets were discussed in detail and a number of the abuses found in this connectiondescribed.The excess of the class I price over the blended price was greatest in the case ofBoston, 1.58 cents per quart, and the least for Baltimore, 0.78 cents per quart, with St.Louis occupying an intermediate position with 1.11 cents per quart. The significanceof these figures lies in the fact that they may be closely related to conditions in thethree milksheds.In Baltimore, where the difference is narrow, market26 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSIONconditions are reported to be remarkably stable, while in Boston and St. Louis thereverse appears to be true.Theactualgrossmarginsperquartonallmilkproductssoldbythedistributorscovered by the inquiry into these four markets during October 1935, were 5.02 centsfor Baltimore, 4.28 cents for Cincinnati, 3.41 cents for St. Louis, and 3.35 cents forBoston.The combined rates of return earned by the companies covered by the inquiry in thefour cities, respectively, on their actual milk business investment ranged from 25.6percent in 1930 down to 14 percent in 1934 for two Baltimore companies; from 20.5percent in 1930 to 3.3 percent in 1934 for two Boston companies; from 13.1 percentin 1930 to a, loss of .02 percent in 1.933 for four Cincinnati companies, and from 19.4percentin1930toalossof2.8percentin1935forthreeSt.Louiscompanies.Itappears that most of the companies covered by the inquiry realized substantial returnsduring 1935 on actual investments in the milk business.Sale and distribution of milk products--Twin Cities area.--Minneapolis and St. Paulare situated in one of the most favorable dairy regions in the United States. Fluid milkconsumedinthetwocitiesissuppliedbytheproducerswithinaradiusofapproximately 40 miles.The Twin Cities Milk Producers Association is the largest producers organizationin the Twin Cities area. Officials of the association met with distributors at least onceeach month to agree upon prices for fluid milk. Fluid milk only was purchased fromthe association by distributors, therefore, there was but one price for one class of milk.The plan of arriving at prices for fluid milk in the Twin Cities area was based upona, final average arrived at by a compilation of average cheese prices on the Plymouth,Wis., Cheese Exchange, and the average 92-score New York Extra butter prices on theNew York butter market. To this final average were added fixed amounts each monthto cover loss of whey, transportation charges, and other incidental expenses.Evidencealsodisclosedthatpriceswereinfluencedbyfluctuationsinthebutterandcheesemarkets, and the price at which distributors could purchase milk independently of theassociation.InMarch1933,independentcreameriesofferedtosellmilkinMinneapolistocustomersofTwinCitiesMilkProducersAssociationat20centsbelowtheassociation price, which resulted in a price war. During the price war, the cooperativeassociationreducedthepriceofmilktoMinneapolisdistributorsto50centsperhundredpounds,orasmallfractionover1centperquart.Thiswaslessthantheassociationreturnedtoitsmembers,thelossbeingreplacedfromthereserve-for-advertising fund. During the low-price periodAGRICULTURAL INCOME INVESTIGATION 27in1933,thenumberofindependentdistributorsinMinneapolispurchasingfromproducers, not members of the association, was reduced from 11 to 4.A marketing agreement and license for milk under the Agricultural Adjustment Actbecame effective in the Twin Cities area September 2, 1933. Minimum prices werefixed for payment to producers and for prices to be charged customers.AGRICULTURAL INCOME INVESTIGATIONINQUIRY WITH RESPECT TO FINANCIAL AND ECONOMIC CONDITION OFAGRICULTURAL PRODUCERSThis investigation was directed by a joint resolution of Congress, Public ResolutionNo.61,Seventy-fourthCongress,firstsession,approvedAugust27,1935,andsubsequently amended by Public Resolution No. 86, Seventy-fourth Congress, secondsession, and Public Resolution No.112, Seventy-fourth Congress, second session.Public Resolution No. 61 directed the Commission to investigate and report to theCongress the extent of the decline in agricultural income in recent years; the extent ofincreases or decreases in the income of principal corporations engaged in the sale,manufacture, warehousing, and processing of principal farm products; the proportionoftotalconsumercostofrepresentativeproductsmanufacturedorprocessedfromprincipalfarmproductswhichisrepresentedbyproceedstothefarmers,manufacturers, processors, warehouse-men, and distributors of such products amidsuchrepresentativeproductsmanufacturedtherefrom;thefinancialpositionoftheprincipalcorporationsengagedinmanufacturing,processing,distributing,andmarketingrepresentativemajorproductsmanufacturedfromsuchprincipalfarmproducts, including the capitalization and assets of such corporations, their investment,costs, profits, and rates of return; the salaries of officers of such corporations and theextenttowhichofficersofsuchcorporationsreceivingSalarieshavepaidincometaxes.TheresolutionalsodirectedtheCommissiontoinvestigatetheextentofconcentrationofcontrolandofmonopolyinthemanufacturing,processing,warehousing, and distribution of major farm products, together with the methods anddevices used by such corporations for obtaining such control and the extent to whichany fraudulent, dishonest, unfair, and injurious methods are employed in the grading,warehousing,andtransportationofsuchfarmproducts,includingcombinations,monopolies, and price fixing.The resolution also directed the Commission to investigate and report the extent towhichcooperativeagencieshaveenteredintotheprocessing,warehousing,andmarketing of representative major farm99567---36-----328ANNUAL REPORT OF THE FEDERAL TRADE COMMISSIONproducts, and the general effect of such cooperative agencies among producers andconsumers.TheresolutiondirectedtheCommissiontoreportanyconclusionsand/orrecommendations with regard to increasing the income of farm producers, or otherrecommendations with regard to the improvement of the economic position of farmersor consumers, growing out of the inquiry.The resolution directing the investigation was approved in August 1935, but fundswere not made available for the purpose until February 1936. During that interval theCommission did such preliminary work as was possible, pending an appropriation byCongress.Seven principal farm commodities were chosen for investigation as comprising theleadingsourceofagriculturalincome.Thesewere:Dairyproducts,cotton,wheat,cattle, hogs, tobacco, and potatoes.Subsequently,byPublicResolutionNo.112,Seventy-fourthCongress,secondsession, provision was made for broadening the scope of the inquiry to include tableand juice grapes, fresh fruits, and vegetables.TheoriginalresolutiondirectedtheCommissiontopresentaninterimreporttoCongress on January 1, 1936, and a final report, with recommendations, not later thanJuly 1, 1936. The interim report was filed as directed. By Public Resolution No.86,Seventy-fourth Congress, second session, the time in which the Commission might fileits final report in response to Public Resolution No 61, was extended to October 1,1986,whilePublicResolutionNo.112directedthataninterimreportontheinvestigation of table and juice grapes, and fresh fruits and vegetables be filed on orbefore January 31, 1937, and a final report in respect to those products not later thanMay 31, 1937.ECONOMIC ASPECTS OF THE INQUIRYAs regards the economic aspects of this investigation, the Commission relied largelyupon information collected by report form or questionnaire. This applies to the extentof increase or decrease of income of those whose income the resolution requires to beinvestigated; to the distribution of the consumers dollar as between groups specifiedby the resolution; to the financial position of corporations covered by the resolution;totheamountsofofficerssalariespaidbysuchcorporationsandtheextentsuchofficers pay income taxes thereon, and the extent to which, if at all, such corporationsavoidincomestaxes;theextentofcontrolandofmonopolyinthehandlingorprocessing of farm commodities; and, to a considerable extent, to the investigation ofproducers cooperative agencies.AGRICULTURAL INCOME INVESTIGATION 29For collecting information on all these matters the report form or questionnaire hasbeen used. However, so comprehensive by necessity was the form, and so many thecompanies covered, that the Commission sent out from 15 to 25 accountants to assistcompanies in their preparation of the forms.Ingeneral,therewasentirewillingnessonthepartofcompaniesscheduledtocooperatebyfillingouttheformsasfullyandaccuratelyaspossible.Inafewinstances, however, although there was no outright refusal of the information requestedthe companies concerned made little or no attempt to compile the information, andonly by the Commissions completely taking the work over were the forms made out.Seven corporations refused to furnish or to permit to be com piled from their recordscertainpartsofthedatarequiredbytheformsanditbecamenecessaryfortheCommissiontoservethemwithdefaultnotices,asprovidedinsection10oftheFederal Trade Commission Act. Four of these companies complied with the Commis-sions request before the expiration of the notice period.At the close of the fiscal year, tabulation of these report-form data was under wayand a portion of the report, less dependent upon report-form returns, was in draft form.LEGAL PHASES OF THE INVESTIGATIONLegal aspects of the investigation included a study of what the original resolutiondescribed as--(1) Methodsanddevicesusedl)ysuchcorporationsforobtainingandmaintainingtheircontrol or monopoly of the manufacturing, marketing, processing, warehousing, and distributionof such commodities,*** ; and(2) The extent to which fraudulent, dishonest, unfair, and injurious methods are employedin the grading, warehousing, and transportation of such farm products, including combinations,monopolies, price fixing.***Tobacco and potato markets studied.--Extensive field inquiry was required in thelegal investigation but the size of the appropriation available made it necessary to limitthe study to two commodities-namely tobacco and potatoes.As to tobacco the field work included investigation and analysis of the practices offarmers, warehousemen, packers, and, dealers in Connecticut, Pennsylvania, Maryland,Virginia,NorthCarolina,SouthCarolina,Kentucky,andTennessee.Usefulinformation and data were obtained from leading tobacco, snuff, and cigar manufac-turers,anddetailedstudiesweremadeofthedistributionoftobaccoproductsinBoston,NewYork;Cleveland,Chicago,andDetroitbychainstores,jobbers,andretailers, but primary consideration was given to the effect upon these distributionalagenciesofthesellingpracticesofmanufacturersandtheactivitiesoftradeassociation.30 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSIONBecause manufacturing and processing are minor elements in the potato business,the inquiry regarding that commodity was confined principally to an examination ofthe marketing and distributive processes. Information was obtained by interviewingfarmersandlocaldealersinFlorida,SouthCarolina,NorthCarolina,Virginia,Maryland, New Jersey, Maine, New York, Michigan, and Wisconsin, and receivers,jobbers, and chain-store operators in the Boston, New York, and Chicago markets.Inquiry also was made with regard to the existence of alleged business racketeering interminal markets and the effects thereof on the producer and consumer.Withminorexceptionsthelegalinvestigationalworkwithrespecttothesetwoagricultural products had been completed and preparation of the final report on thelegal phases commenced before the close of the fiscal year.COLLUSIVE BIDS ON STEEL SHEET PILINGREPORT TO PRESIDENT REFERRED TO ATTORNEY GENERAL FORAPPROPRIATE ACTIONAtthedirectionofthePresident,theCommissionmadeaninvestigationofthecircumstances under which producers of steel sheet piling had submitted identical bidsonthreeconstructionprojectsfinancedwithFederalfunds.ThecomplaintshadoriginatedwithSecretaryoftheInteriorIckes,inchargeofthePublicWorksAdministration. The inquiry was pursued and the results submitted June 10, 1936, tothePresident,whoimmediatelyreferredthereporttotheAttorneyGeneralforappropriate action. The three projects involved were the Triborough Bridge at NewYork City, a harbor project at Miami, Fla., and an ocean terminal at Morehead City,N. C.TheCommissionfoundthatthebidswereidenticalbecausethebiddershadcontinued to formulate delivered prices under the basing point system as set out in theN. R. A. Code and that the industry had adopted a formal resolution to carry Oil underthe code after the Supreme Court had held such codes unenforceable. The bidders notonly admitted that the basing point system was the reason for their identical deliveredprices, but the Commission was able to confirm the admission by breaking down thoseprices into their constituent elements and accounting for the identity of each element.Thereareonlyfivedomesticproducersofsteelsheetpiling,twoofthenbeingsubsidiaries of the United States Steel Corporation. The other three are BethlehemSteel Corporation, Inland Steel Co., and Jones & Laughlin Steel Corporation.Thereportdemonstratedthatthebasingpointsystemonsteelsheetpilingisinessence in a single basing point system over large areas,COLLUSIVE BIDS ON STEEL SHEET PILING 31withPittsburghgoverningmostoftheeasternsectionofthecountryandChicagogoverning most of the west. When mills in one area sell into the area governed byanotherbasingpoint,theymustabidebythepriceoftheotherbasingpoint,eventhough it is higher than their own. When selling piling in the higher price territoriesgoverned by Chicago and Buffalo, this requirement applies to Pittsburgh. The reportdiscloses that identity of delivered prices on steel products generally is preserved tofractions of a tenth of a cent by elaborate formulae worked out by committees of theAmericanIronandSteelInstitute.Inonecase,abidderwas12centsbelowhiscompetitorsona$60,000Governmentorderforpipe,becausehecarriedoutthedeliveredpricetothreedecimalplacesinsteadoftwo.Whendiscovered,suchloopholes were stopped by special provisions.In answer to the Presidents inquiry whether the prices quoted on steel sheet pilingin the three cases investigated were fair and reasonable, the Commission reportedthat an affirmative answer could not be given. It pointed out that a price which is fairandreasonableforoneproducertestedbyabilitytoprovideearningsonitscapitalizationoronitsactualinvestmentmaybewhollyinadequateforanotherproducer and excessive for a third. The report illustrated this by an analysis of thedifferent earnings on capitalization of the several piling producers. In this connection,itwasbroughtoutthatalthoughheavilyovercapitalized,theUnitedStatesSteelCorporation built up a huge surplus from the level of prices maintained for many years.While the price level since the depression has provided that corporation inadequateearningsonitscapitalization,ithasprovidedadequateearningsforsomeofitscompetitors. Nevertheless, that corporation is the acknowledged price leader of theindustry. The report also presented a number of other reasons that would preclude anyaffirmation of the fairness and reasonableness of the prices on sheet piling. Amongthemwas that it would be inadmissible as a matter of public policy to consider thefairness and reasonableness of a price fixed in violation of law.The report stressed the broader social and economic significance of the conditionstypified by the collusive bidding on sheet piling. It pointed out that the entire pricestructure of the iron and steel industry was the result of an elaborate concert of actionamongsupposedlycompetinginterestsamidthatotherimportantindustriesweresimilarly organized. The cement industry, closely allied with steel and with its largestproducerasubsidiaryoftheUnitedStatesSteelCorporation,usesabasingpointsystemsimilartothatofthesteelindustry.Aprominentcementmanufacturer,inwritinganofficerofhistradeorganization,characterizedassheerbunkandhypocrisy the contention that the system is an expression of free competi-32 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSIONtion.Hefurtherstatedthatthecementindustrymustsystematicallyrestraincompetition or be ruined.The report made reference to Secretary Ickes recent testimony before the SenateCommitteeonInterstateCommercethatduringthe9-monthperiodimmediatelysubsequent to the codes, his department had received identical bids on 48 differentcommodities and in 257 instances, and that as a result the Federal statute requiringawardstobemadeonthebasisofcompetitivebids,hadbeennullified.TheCommission reiterated statements made in a prior report as an epitome of the issue:If the capitalistic system does not function as a competitive economy, there will be increasingquestion whether it can or should endure. The real friends of capitalism are those who insist onpreserving its competitive character.TEXTILE INDUSTRIESREPORT, WHEN COMPLETED, WILL EMBRACE PERIOD OF 1938-JUNE 30,1936Origin of the inquiry.--The Commissions textile inquiry was undertaken pursuanttoanExecutiveorderofSeptember26,1934,whichdirectedtheCommissiontoinvestigate and report on the labor costs, rates of return, and investments of companiesin the textile industries in order to show what effect increased wages or shorter hoursmight have on such industries, and to make public the results. The Commission limitedits inquiry to the spinning (throwing for silk), weaving, and finishing of cotton, wool,silk, and rayon yarns and woven goods and the manufacture of thread, cordage, andtwine.OnJanuary25,1935,thePresidentrequestedtheCommissiontoContinuetheinvestigationtocoverthelast6monthsof1934,andlater,itscontinuancewasauthorized by an appropriation so as to include 1935 and the first 6 months of 1936.Reportsissued.--TextileIndustries,Part1,InvestmentandProfit,apreliminarysummary report covering 765 companies, was made public as of December 31, 1934.Reports based on data furnished by these 765 companies for specified periods fromJanuary 1, 1933, to August 31, 1934, were issued during the fiscal year ending June30,1935.Thesereportswereasfollows:Part2,CottonTextileIndustry;Part3,Woolen and Worsted Textile Industry ; Part 4, Silk and Rayon Textile Industry ; Part5, Thread, Cordage, and Twine Industries ; and Part 6, Tabulations Showing Financialand Operating Results According to Rates of Return on Investment, Rates of Net Profitor Loss on Sales, and Amount of Investment.During the fiscal year ending June 30, 1936, a report based on information furnishedby 1,059 companies covering the four 6-month periods from the beginning of 1933 tothe end of 1934 was issued in four parts. The titles of these parts are:TEXTILE INDUSTRIES 33Part 1.--The Cotton Textile Industry in 1933 and 1934.Certain tabulations made at the suggestion of the Cabinet Committee on Textilesshowing analysis of operating results in 1933 and 1934, grouped by type of product,size of textile investment, rate of return on textile investment, and by profit or loss onsales, of 108 cotton spinning companies, and for 296 companies manufacturing cottonwoven goods.Part 2.--The Woolen and Worsted Textile Industry in 1933 and 1934.Part 3.--The Silk and Rayon Textile Industry in 1933 and 1934.Part 4.-The Thread, Cordage, and Twine Industries in 1933 and 1934.The first two parts of a study based on data furnished by 1,188 companies for thefirst half of 1935 were issued during the fiscal year ending June 30, 1936. The thirdpart was practically completed at the end of the fiscal year. The titles of these partsare:Part 1.--The Cotton Textile Industry in the First Half of 1935 (including Thread,Cordage and Twine).Part 2.--The Woolen and Worsted Textile Industry in the First Half of 1935.Part 3.--The Silk and Rayon Textile Industry in the First Half of 1935.In addition to the foregoing, preliminary reports based on information furnished by582cottontextilecompaniesforthefirsthalfof1935andby257cottontextilecompanies for the 6-month period ending December 31, 1935, were released as ofMarch 19 and April 10.As rapidly as these parts were completed, copies were forwarded to the President,the Cabinet Committee on Textiles consisting of Hon. Henry A. Wallace, Secretary ofAgriculture; Hon. Frances Perkins, Secretary of Labor; Hon. Cordell Hull, SecretaryofState;andHon.DanielC.Roper,SecretaryofCommerce;theLaborAdvisoryBoard, and other interested Government officials, textile trade associations, and laborexecutives, and made available to the public. Further reports to be made public laterwill cover the period up to and including June 30, 1936.The report for the first half of 1935 introduced tables showing separately the unitcost of labor, fuel and power, dyes and chemicals, property taxes, depreciation, gainor loss on commodity exchange futures, processing tax, raw material, cost of sellingand bad debts, payments to officers and directors, and other general and administrativeexpenses, for each pound or square yard of goods sold. These unit costs are shown foronly a limited number of companies in each branch of the textile industries, due to thefactthatthemajorityofthecompaniesmanufacturetwoormoregeneraltypesofproduct, and the separation of mill cost for different kinds of goods manufactured inthe same plant is a very difficult cost accounting problem.34 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSIONDuetothesecostaccountingdifficulties,thetextilemanufacturerswerenotrequestedtofurnishcostdataorsellingpricesfordifferenttypesofgoodsmanufactured.Consequently, it was impossible to show unit cost where two or moredifferent types were produced.Ratios of cost for groups of companies manufacturing the same classes of goods,grouped by size of investment, rate of return on textile investment, and by profit orloss on sales are shown in appendix tables of the textile reports.ELECTRIC AND GAS UTILITIESINVESTIGATION CONCLUDED AS OF DECEMBER 31, 1935Theelectricandgasutilityinquiry,begununderSenateResolutionNo.83,Seventieth Congress, first session, introduced by the late Senator Walsh, of Montana,andcontinuedunderSenateJointResolution115,Seventy-thirdCongress,secondsession, was concluded at the close of the calendar year 1935.The accounting examination of electric and gas utility companies covered the growthofcapitalassetsandcapitalliabilities,methodsofissuingsecurities,includingpayments of commissions, fees, bonuses, etc., and the relations between electric andgas holding companies and subsidiary operating, construction, and finance companies.Astudywasalsomadeofservicingandothercontractsbetweentheholdingcompanies and operating utilities, of syndicate operations in which company officialswereactive,andengineeringandeconomicsurveysweremadeofthephysicalproperties and operations of producing, pipe-line transportation, and distribution com-panies and systems.Duringtheinquiry,theCommissionsaccountants,engineers,andeconomistsexamined29holdingcompanieshavingtotalassetsof$6,108,128,713,also70subholdingcompanieswithtotalassetsof$5,685,403,201,and278operatingcompanieswithtotalassetsof$7,245,106,464.Inmanycasesanexaminationinvolved numerous predecessor companies.Testimony and reports printed as exhibits on the financial and economic phases oftheelectricandgasutilitiesindustriesareprintedin64volumeswithatotalofapproximately 52,000 pages. In addition, three volumes of summary reports, and anindex to volumes 21-45, inclusive, have been published.PUBLICITY AND PROPAGANDA ACTIVITIESThe Senate resolution under which the investigation was conducted said:ELECTRIC AND GAS UTILITIES 35The Commission is further empowered to inquire and report whether, and to what extent, suchcorporationsoranyoftheofficersthereoforanyoneintheirbehalforinbehalfofanyorganizationofwhichanysuchcorporationmaybeamember,throughtheexpenditureofmoney or through the control of the avenues of publicity, have made any and what effort toinfluence or control public opinion oil account of municipal or public ownership of the meansby which power is developed and electrical energy is generated and distributed, or since 1923to influence or control elections: Provided, That the elections herein referred to shall be limitedto the elections of President, Vice President, and Members of the United States Senate.Pursuant thereto, the Commission(1) Investigated mid reported upon the publicity and propaganda activities and expendituresof the various associations and committees of the electric and gas industries. The record of thispartoftheinvestigationispracticallyallcontainedinvols.1to20,inclusive,withaccompanying volumes of exhibits. The report oil this phase is printed as part.71--A, and theindex to these volumes is printed as part 72-A.(2) Investigated and reported on the publicity and propaganda activities and expenditures ofthe various groups and companies. These activities were carried on either in connection with theassociations and Committees, or separately, and are additional to those reported on in part 71-A.The records of these activities and expenditures are printed throughout the various volumes, inconnection with the reports on the financial structure. The report on this phase is printed as part81A.This volume also contains an index to the publicity and propaganda material found iiivols. 21 to 84, inclusive.RECORD OF INVESTIGATION EMBRACES 94 VOLUMESThe record of the investigation embraces 94 printed volumes, of which 84 comprisetestimony and exhibits, 1 4 of which are summary reports, 1 is a final report, 1 is acombined final report on publicity and propaganda with index, 2 are appendixes, and2 are indexes.Printed as part of the series known as Utility Corporations, Senate Document 92,Seventieth Congress, first Session, the summary, final, appendix, and index volumesare as follows:Title Vol. no.Summary report: Compilation of proposals and views for and against Federal incorporation and licensing of corporations and compilation of State constitutional, statutory, and case lawconcerning corporations with particular attention to public-utility holding and operating companies 69-A.Summary report: Efforts by associations and agencies of electric and gas utilities to influencepublic opinion 71-AIndex of association publicity and propaganda and index of names in parts I to 20, inclusive; and accompanying exhibit volumes 71-BSummary report: Economic, financial, and corporate phases of holding and operating companiesof electric and gas utilities 72-ASummary report: Holding ami operating companies of electric and gas utilities.Survey of State laws and regulations, present extent of Federal regulation, and the need of Federal legislation,conclusions and recommendations and legal studies in support thereof 73-AIndex to testimony In parts 21 to 45, numerical list of exhibits in parts 21 to 45, index of exhibits in parts 21 to 45 index to record on company publicity and propaganda-parts 21 to 45, inclusive. 77-AReport on publicity and propaganda activities by utilities groups and companies, with index 81-AFinal report en economic, corporate, operating, and financial phases of the natural-gas-producing, pipe-line, and utility industries, with conclusions and recommendations 84-ALegal appendixes to no. 84-A 84-BEconomic appendixes to no. 84-A 84-01 Volume 84 was in press at the time of publication of tills report.36 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSIONINDEX TO ELECTRIC AND GAS REPORTSThe first section of the index of the reports in utility corporations, embracing parts(volumes)21to45,wasreceivedfromtheprinterduringthefiscalyear.Thisisincluded in part 77-A.The second section of the index, comprising parts 46 to 70, inclusive of the publicutility reports, was completed.These indexed volumes total about 22,000 pages ofaccountingandotherreportsandtestimonythereon.Theindexcoversabout800subjects and on these subjects some 200,000 references are made.Upon completion of parts 46 to 70, work on the third and final section of the indexwas undertaken. This section will include parts 71 to 84, inclusive, and will coverabout 11,000 pages.During the fiscal year, hearings were held at which reports concerning the followingcompanies or subjects were placed in the record:COMPANIES CONCERNING WHICH HEARINGS WERE HELDVol- Vol.Company ume of Company ume ofrecord 1 record 1Almout Pipe Line Co., Ltd. (Canada) 84 Georgetown Gaslight Co. (principallyAmere Gas Utilities Co 84 manufactured gas) 84Appalachian Gas Corporation 84 Granite Trading Corporation (formerlyAppalachian Management & Engineering G. L. Ohrstrom & Co., Inc.)Corporation 84 Granite Trading Corporation (formerlyAspen Mountain Gas Co 84 G. L. Ohrstrom &Co., Inc.) 81Atlantic Seaboard Corporation 83 Home Gas Co 84Binghamton Gas Works 84 Hope Natural Gas Co 84Bowdoin Holding Co 84 Hope Producing Co 83Bowdoin Utilities Co 84 Hope Producing Co 84British thermal unit content of natural gas Houston Gas & Fuel Co 83(Relative Usefulness of Different Heat- Houston Gulf Gas Co 83ing Values) 81 Hutcherson Pipe Line & Gas Co 84Canadian River Gas Ca 82 Inland Gas Corporation (indentures) 84Central Hanover Bank & Trust Co 84 Interstate Natural Gas Co., Inc 84Central States Gas Utilities Co 84 Iroquois Gas Corporation 84Cities Service Co. (vol. II) 83 J. D. Judd & Co 84Cleveland municipal system 81 Kansas Pipe Line & Gas Co 84Colorado Interstate Gas Co 82 Kansas Power & Light Co 84Colorado Interstate Gas Co. (testimony) 84 Kentucky Fuel Gas Corporation (indenColumbia Engineering Corporation 82 tures) 84Columbia Engineering & Management Kentucky Gas Transmission Corporation 84Corporation 82 Kentucky-West Virginia Gas Co 83Columbia Natural Gas Co 84 Keystone Gas Co., Inc 84Commonwealth Gas Corporation 84 Keuka Construction Co 84Commonwealth Gas Systems, Inc. (man. Kingman Gas Co 84agement 84 Liberty Gas Co 84Commonwealth & Southern group (pub- Lone Star Gas Co 84licity and propaganda material) 79 Lone Star Gas Corporation group 80Community Natural Gas Co 84 Lone Star Gas Corporation system (engi-Connecting Gas Co., The 84 neering) 84Consolidated Utilities Co 84 Lycoming Producing Co 84County Gas Co 84 Lycoming United Gas Corporation 84Dallas Gas Co., The 84 Maryland Gas Transmission Corporation] 84Dallas Gas Corporation 84 McPherson Gas Co 84East Ohio Gas Co 83 McPherson Oil & Gas Development Co.] 84El Paso Natural Gas Co 84 Memphis Natural Gas Co 84El Paso Gas Utilities Co 84 Minot Gas Co 84Western Gas Co 84 Minnesota Northern Power Co 84Equitable Gas Co 83 Mississippi River Fuel Corporation 82Federal Water Service Corporation (G. L. Missoula Gas & Coke Co 84Ohrstrom group) 81 Missouri-Kansas Gas Co 84Fidelity Gas Co 84 Missouri-Kansas Pipe Line Co. 84Gas Corporation of Concordia 84 Montana Cities Gas Co 84Gas Development Co 84 Montana-Dakota Power Co 84Gas Lands Co 84 Montana-Dakota Utilities Co 84Gas Utilities Co 84 Montana Petroleum Co 841 Utility Corporations, S. Doc. 92, 70th Con g., 1st seas.ELECTRIC AND GAS UTILITIES 37COMPANIES CONCERNING WHICH HEARINGS WERE HELD--ContinuedVol- Vol.Company ume of Company ume ofrecord 1 record 1Mountain Fuel Supply Co 84 Reserve Gas Co 84National Fuel GasCo 84 River Gas Co 84Natural Gas Distributing Co 84 San Antonio Public Service Co 84Nebraska Natural Gas Co 84 Shale Gas Corporation 84New York State Natural Gas Corporation. 84 Southern Gas Co 83Niagara Hudson group (exhibits of min Southern Gas & Fuel Co 83utes of various companies) 79 Southern Gas & Fuel Co. Re: New OrleansNorth American Light & Power Co. Public Service Co. contract 84(gathering system) 84 Southern Gas Utilities, Inc 83North American Oil & Gas Co. 84 Standard Gas & Electric Co. (interstateNorth American Pipe Line Co 84 statistics 84Northern Natural Gas Co. and subsidi- Tatloyd Oil & Gas Co 84aries 81 Texas Interstate Pipe Line Co 84Northern Natural Gas Co 83 Uinta Pipe Line 84Northern Natural Gas Development Co. 84 United Gas Corporation 83Northern Texas Utilities Co 83 United Gas Public Service Co 83Northwest States Utilities Co 81 United Natural Gas Corporation 84Ogden Gas Co 84 United Power & Light Corporation 84Ohio Edison Co. (Commonwealth & United Production Corporation 83Southern Group) 79 Utah Gas & Coke Co 84Oklahoma Natural Gas Co 83 Utilities Power & Light CorporationOklahoma Natural Gas Corporation 84 (schedule E) 81Panhandle Eastern Pipe Line Co 84 Virginia Gas Distributing Corporation 84Pan handle Illinois Pipe Line Co 84 Virginia Gas Transmission Corporation 84Peoples Gas Co 84 Wasatch Gas Co 84Peoples Ice & Fuel Co 84 Washington Gas Light Co. (principallyPeoples Natural Gas Co 84 manufactured gas) 84Pittsburgh & West Virginia Gas Co. 83 Western Gas Co 84Power, Gas & Water Securities Corpora- Western Pipe Line & Gas Co 84tion (G. L. Ohrstrom group) 81 Western Public Service Corporation 84Public Service Co. of Kansas 81 Wibaux Gas Co 84Relative Usefulness of Different HeatingValues (B. t. u. content of natural gas) 81FINAL REPORT ON NATURAL GAS INDUSTRYThe work during the last 6 months of the inquiry was confined to the completion oftheexaminationofcompaniesengagedinthenaturalgasbusiness,andinthepreparation of a final report on the natural gas industry.This report was submitted to Congress December 31, 1935, and summarized theprincipal facts developed in this part of the inquiry.Thisreportdescribedthegrowthandimportanceofthenaturalgasindustry;economic aspects of exploitation, waste, and conservation; technical problems of theindustry, including field conditions affecting the installation and operation of naturalgas Supply systems and building and development of transportation systems of naturalgas, and the marketing of natural gas.It also described the purchasing policies and practices of the large natural gas pipelinecompaniesandgroups;presentedpricespaidtoorchargedproducers,distributors,andConsumers;andsummarizedthefactsinrespecttotheform,structure, and practices of holding companies, and their competitive relations. In thereport were set forth in detail the growth of assets of principal natural gas holdingcompany groups and information concerning growth of capital liabilities and financingmethods of natural gas production, transmission, and distribution companies.38 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSIONThe report also presented in detail an analysis of income, expenses, and surplus oflarge gas companies; information concerning the servicing and servicing arrangementsof representative gas utility systems, and gave a description of the physical propertiesand operating characteristics of typical natural gas transmission companies.Another feature of the Commissions summary report on the Economic, Corporate,Operating, and Financial Phases of the Natural-Gas Producing, Pipe-Line, and UtilityIndustries with Conclusions and Recommendations, was a series of maps showing, asof 1934, the principal natural-gas producing areas of the United States ; the principalnatural-gaspipelinesoftheimportantnatural-gascompanies,anddetailedsystemmaps for 18 large natural-gas pipe line company groups.PRINCIPAL ABUSES IN GAS INDUSTRY LISTEDIncluded in the report were a summary of facts and a survey of the legal situationrespecting the natural-gas industry.The principal abuses in the industry disclosed bythe investigation were summarized in the final report as follows:(1) Great waste of natural gas in production.(2) Excessivecostofnatural-gasproductionthroughextravagantcompetitionindrilling wells.(3) Unregulated monopolistic control of certain natural-gas production areas.(4) Unregulated control of pipe-line transmission and of whole-sale distribution.(5) Discrimination in some instances in field purchases of natural gas, and refusalsto purchase from independent producers.(6) Unregulated competition in building natural-gas pipe lines to markets.(7)Costlystrugglesbetweenrivalnatural-gasinteresttoconquerordefendterritories of distribution.(8) Excessive and inequitable Variations in city gate rates for natural gas amongdifferent localities.(9) Pyramiding investments in natura